Thoughts From the Frontline, December 2010

I
am neither a market timer nor the son of a market timer. I left my office in
the Texas Rangers ballpark this year, and they went to the World Series. I
bought Dallas Cowboys season tickets for the first time in 50 years, as they
went down in flames. But I do know a few very good timers, and they are sending
out warnings. Today, we look at a few of these, as it might pay to hedge some
of your equity portfolio as we go into the New Year. I also answer some
questions as to my view...

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How
often did we as young kids go down the street kicking a can? “Kicking the can
down the road” is a universally understood metaphor that has come to mean not
dealing with the problem but putting a band-aid on it, knowing we will have to
deal with something maybe even worse in the future.

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Correct
me if I’m wrong, but I seem to remember that one of the reasons for QE2 was to
lower rates on the longer end of the US yield curve. Clearly, that has not
happened? Today we look at come of the unintended consequences of monetary
policy, turn our eyes briefly to consumer debt, and wonder about deflating
incomes. There are a lot of very interesting things to cover. (This letter will
print long, but there are a lot of graphs. Usual amount of copy.)

But
first, the...

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Why
is it that the Irish must take upon themselves the debts of their banks, which
in reality are debts owed to German and French banks? Why should the Germans
bail out the Greeks and the Spanish? Is the spread of “contagion” starting to
taint the debt of Italy and even Belgium, the home of the EU? This week we look
over the pond (of the Atlantic) and wonder how all these things will end. As I
noted last week, we are getting a string of not so bad news out of the US, so
now there...